Risk of non-compliance with wages and record-keeping requirements

The Fair Work Ombudsman (FWO) has released its annual report, which shows that it cost South Australian businesses more than $1.5 million in the last financial year.

South Australia had the third highest number of audits in the whole country, behind Queensland and New South Wales.

The FWO undertook 1,123 audits and five regional campaigns in South Australia from 30 June 2010 and 1 July 2011, as well as processing 1,525 complaints during that period.

More than a thousand employees throughout the State were awarded payments that were recovered from complaints and targeted audits.

These high numbers show the importance of complying with legislative requirements such as those detailed in the Federal Fair Work Act 2009.

The FWO conduct audits to check employment records to assess compliance. This includes examining whether the payment of wages and rates of pay for employees is correct.

For example, if a business’ Australian Business Number (ABN) is not included on their employees’ pay slips, the business is considered non-compliant and in breach of the Federal Fair Work Act 2009. As such, the business may face penalties and may be targeted in future audits conducted by the FWO.

In addition, the FWO target all types of business, including small and large enterprises and all sectors and industries. Audits are launched in response to complaints or information the FWO receive from a variety of different sources, such as industry association, ministers or the media.

What are the penalties?

There can be a number of different courses of action or outcomes against employers if the FWO find any contraventions.

These include:

  • issuing a contravention letter and/or compliance notice;
  • telling employees they can pursue small claims action;
  • issuing an infringement notice;
  • court action which could result in court ordered penalties; and/or
  • seeking an enforceable undertaking.

Contravention Letter

A contravention letter is used to an organisation when a problem has been identified and states that the problem must be fixed within 14 days.

Compliance Notice

A compliance notice contains details of the problem and how it should be fixed. In addition, it details that the business can apply for a review if entitled to. A review can be granted to anyone on the grounds of:

  • an inspector’s behaviour was unprofessional;
  • the process was unsatisfactory; or
  • not agreeing with the outcome.

Small Claims Action

An employee or former employee can take small claims action against their employer or former employer under the Federal Fair Work Act 2009. Small claims action allows an employee to recover any overdue entitlements and is generally a more informal process than litigation such as court proceedings. Small claims action can be taken at any time within the set limit, which is usually six years from when the supposed entitlement was to be paid. Employees cannot recover more than $20,000, but can take court action if their entitlement exceeds the limit. 

Infringement Notice

Fair Work Inspectors can issue infringement notices to businesses that breach Federal workplace laws in relation to pay slips and record-keeping.

Infringement notices are fines for breaches that have occurred and are $330 per contravention for an individual and $1,650 per contravention for a body corporate.

Infringement notices can be issued on-the-spot or within 12 months of the identified contravention.

Court Ordered Penalties

Contraventions may be taken to court in instances when the business refuses to fix the contravention. In these circumstances, the court may hand down penalties, which can include an order to pay a sum of money. This is up to $6,600 for an individual and $33,000 per contravention for a body corporate. They can also order an organisation to reinstate the employee or award the employee compensation.

Enforceable Undertakings

The Fair Work Ombudsman (FWO) can offer a business the option of an enforceable undertaking where alleged breaches have occurred.

Enforceable undertakings are up to the FWO’s discretion and are generally entered into to avoid costly court action. They are also agreed to in an effort to ensure long-lasting and ongoing compliance. Employers are not required to accept an enforceable undertaking, but the alternative is generally litigation.

The FWO are unlikely to offer an enforceable undertaking in cases where there have been deliberate breaches.

Past incidences show that it is generally large employers and businesses that are offered an enforceable undertaking; however, there is no outline as to who qualifies.

Enforceable undertakings tend to include a number of requirements. Enforceable undertakings have a number of requirements ranging from monetary obligations to training courses and formal apologies.

Examples of a range of obligations from a number of different cases include:

  • back-pay current and former employees (in one case this cost an organisation more than $1.3 million alone);
  • undertaking self-audits;
  • make donations to relevant charities and organisations such as the Working Women’s Centre;
  • write a letter of apology to all affected staff;
  • take out an advertisement in a national newspaper apologising for the breach;
  • place public notices in local newspapers;
  • training courses for management;
  • report to the FWO every year for a certain period of time;
  • implementing policies and processes to ensure ongoing compliance;
  • hold a paid meeting to explain the contravention to all employees; and
  • future auditing by the FWO.

What can Business SA do for you?

To help you comply with your legislative requirements and avoid any costly disputes or penalties, Business SA has a range of services and publications available.

The Telephone Advisory Service has a team of experienced Business Advisers who can help you with rates of pay and classifying employees and business to meet your legislative requirements.

The online Business Bookshop contains a comprehensive range of publications, covering essential areas of workplace relations, taxation, human resource management and employment law. A number of the publications are updated to inform you of any relevant legislative changes.

In particular, the Employment Documentation Package - 4th Edition contains pro forma documents to help your business to be compliant with its record-keeping requirements under workplace law. Readyto tailor to suit your business’ needs, this package helps you navigate your way through the complex world of the employment relationship from recruitment and ongoing management all the way through to termination.

For more information, contact the Business Advisory Centre on 08 8300 0101.

Adelaide Office

Level 1
136 Greenhill Road Unley
South Australia 5061

P 08 8300 0000
F 08 8300 0001



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